TXED: Favored Home of Patent Claimants

The Eastern District of Texas is unique among the 94 federal district courts.  Over the past decade the district, 200 miles east of Dallas, has become an epicenter of patent litigation in the United States.  The rise of the Eastern District under the guidance of Judge John Ward has been well-documented, and is not a coincidence: Judge Ward very intentionally built his district’s reputation as being trial friendly—or, to listen to his critics, plaintiff and patent-troll friendly.  By expediting trials and deferring to plaintiff-favoring juries, among other factors, the judges of the Eastern District made their court a favorite destination of forum-shopping plaintiffs with patent claims.

The forum shopping has not been unwelcome—the flood of patent cases filed in Marshall has brought added prestige to the four E.D. Tex. judges and has been an economic boon to the community.  For patent attorneys and parties to suits brought there, the judges’ familiarity with and expertise in patent law has made litigation more predictable.  The result has been analogous to Delaware’s rise in the area of corporate law, with a similar mix of criticism and praise.

Now, however, the Federal Circuit has threatened the primacy of the Eastern District of Texas for patent litigation.  The Federal Circuit’s writ of mandamus on Thursday was its third this year directing the Eastern District to vacate a decision denying venue change and transfer venue to the district requested by the defendant.  As in In Re Genentech and In Re Hoffmann-La Roche (the latter decided just three weeks ago), the C.A.F.C. in In Re Nintendo said it was “clear and indisputable” that the Eastern District misapplied the Fifth Circuit’s framework for considering venue change under 28 U.S.C. § 1404(a) and abused its discretion by refusing the requested transfer motion.

Venue Change after TS Tech

All three cases follow from the C.A.F.C.’s decision in In Re TS Tech.  That case was appealed from Lear Corp. v. TS Tech, in which TS Tech moved for transfer for venue from EDTX to the Southern District of Ohio.  TS Tech argued that OHSD was the more appropriate venue because the physical and documentary evidence was mainly located in Ohio and the key witnesses all lived in Ohio, Michigan, and Canada.  TS Tech’s only alleged connection to Texas was that it sold some of its products there, as it did nationwide.  Judge Ward denied the motion for transfer, giving significant deference to the plaintiff’s choice of venue and saying that the sale of TS Tech’s products in the district gave the local citizens a “substantial interest” in the litigation.

The Federal Circuit disagreed.  In a landmark decision that cited no substantive patent law, the court decided the matter on largely procedural grounds.  In the Fifth Circuit, a motion for venue change should be granted when the proposed venue would be “clearly more convenient” than the venue chosen by the plaintiff, a determination made by weighing the eight “public” and “private” forum non conveniens factors from In re Volkswagen.  The Federal Circuit said Judge Ward’s misapplication of the factors was so great as to produce a “patently erroneously result”—the standard for a writ of mandamus.

The Federal Circuit identified four “key errors” made by the Eastern District.  First, the district court gave too much weight to the plaintiff’s choice of venue—Judge Ward treated the plaintiff’s choice as a ninth forum non conveniens factor to be weighed in the Volkswagen analysis.  The plaintiff’s choice actually only shifts the burden onto the moving party to prove, using the eight factors, that its proposed venue is “clearly more convenient” than the original venue—the plaintiff’s preference should not be given any weight in itself.  Second, the district court “completely disregarded” precedent in assessing the cost of attendance for witnesses.  The cost and inconvenience of having key witnesses travel over 100 miles to a venue should be considered, and “the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.”  Even though all the key witnesses would have had to travel approximately 900 miles further with the case in Texas, the district court said it “was not persuaded to give great weight” to the inconvenience.  The Federal Circuit said this was clearly erroneous, and found this factor to weigh significantly for transfer.

Third, the district court purposefully discounted the relevance of all the physical and documentary evidence being much closer to the proposed venue, and none of the evidence being in Texas.  Judge Ward’s decision said that “the increased ease or storage and transportation” makes the factor assessing relative ease of access to sources of proof “much less significant.”  The Federal Circuit noted that this interpretation was directly contrary to Fifth Circuit precedent, which indicates that modern ability to store, transport, and electronically view evidence does not neutralize this FNC factor.  Finally, the district court disregarded Fifth Circuit precedent as to “the public interest in having localized interests decided at home,” finding a local interest in the outcome of the case because some of the defendant’s products had been sold within the borders of the Eastern District.  The Federal Circuit said the district court’s application of this factor had been “unequivocally rejected” by the Fifth Circuit.  This factor only weighs against transfer when there is a local connection to the case that is greater than in the proposed venue—here, because the defendant’s products were sold nationwide, there was no more connection to the case in Marshall, Texas than there was in any other federal district.

In Re Nintendo

Much of the Federal Circuit’s analysis in Nintendo was identical to its analysis in TS Tech, Genentech, and Hoffmann-La Roche.  The court said a “stark contrast in relevance, convenience, and fairness between the two venues” existed in Nintendo “as in” those other three cases, and the court “has held and holds again in this instance that in a case featuring most witnesses and evidence closer to the transferee venue with few or no convenience factors favoring the venue chosen by the plaintiff, the trial court should grant a motion to transfer” (emphasis added).

The Federal Circuit identified the same four errors in FNC-factor analysis in Nintendo as it did in TS Tech, reiterating that the plaintiff preference is not a factor to be considered, and restating the importance of the cost and inconvenience of additional travel to get to Texas for witnesses, the physical location of evidence, and the lack of local connection to the case.  The Federal Circuit was also unimpressed by an argument by the district court that because key witnesses were located in Japan, Washington, and New York, the Eastern District could serve as a “centralized location” for the case.  The Federal Circuit rejected that claim (as it had in Genentech), and noted that to even make this “hypothesized” argument the district court included minor satellite offices of the parties in its analysis that probably should not have been considered.  Accordingly, the court ruled that “the district court clearly abused its discretion in denying transfer from a venue with no meaningful ties to the case.”

Future application

The factors motivating the Federal Circuit’s conclusion could easily apply to a significant number of cases brought in the Marshall courthouse.  The Eastern District of Texas’ centrality to the world of patent litigation has been questioned precisely because it is rarely convenient for witnesses to get there, the source of the case’s evidence, or locally connected to the issue at trial.  In TS Tech, Genentech, Hoffmann-La Roche, and now Nintendo, the Federal Circuit has made clear that in such cases, the district court should grant venue-transfer motions to more convenient districts.  Often, the only stated reason to have the trial in the Marshall courthouse is the plaintiff’s preference or possibly its neutral, central location between the actual places witnesses or evidence are to be found.  The Federal Circuit has made clear that these considerations are categorically insufficient to outweigh the three problem factors.  A forum-shopping plaintiff—or an EDTX judge protecting the relevance of the district—has significantly less ground on which to defend a denial of motion transfer after Nintendo.

Though the quartet of mandamus cases could represent a dramatic blow to the EDTX’s plaintiff-friendly reputation, it’s yet to be seen if TS Tech will result in a “wave of transfers of actions” from the Texas district.  One reason to believe the change will be moderate is In Re Telular Corp., in which a motion for a writ of mandamus on the same bases as the defendants in TS Tech and Nintendo was denied by the Federal Circuit.  Judge Moore emphasized that even if the Federal Circuit disagreed with the district court ruling, for a writ of mandamus he must defer to the lower court unless “it is clear that the facts and circumstances are without any basis for a judgment of discretion.”  The decision noted that unlike in those cases where the Federal Circuit had recently granted writs for transfer, the venue proposed by Telular was not clearly more convenient than the Eastern District.  In the other cases, the key witnesses and evidence were unequivocally closer to the proposed venue; here, two key witnesses would potentially be more inconvenienced traveling to the proposed venue, and some evidence would potentially be more costly to send to the proposed venue.  Additionally, Telular waited five months after the district court’s denial of transfer to motion for the writ; Judge Moore noted that although “remedy by mandamus is at law, its allowance is controlled by equitable principles,” so Telular’s delay weighed against granting the writ.  Together, these two aspects of Telular led to the Federal Circuit’s conclusion that mandamus was not appropriate.

Game over?

The conclusion for patent litigators on the defense side should be one of cautious optimism.  The four writs of mandamus coming from the Federal Circuit since December 2008 gives defendants hoping to avoid the plaintiff-friendly district a last resort assurance against the clearest cases of forum-shopping.  Moreover, the language of the decisions indicates that the Federal Circuit might be sending a message to the Texas judges to scale back their efforts to boost the importance of their district.  On the other hand, Telular shows that the Federal Circuit still gives deference to the district courts to make rational decisions regarding change of venue motions.

The issue going forward will be how the judges of TXED react to the Federal Circuit’s five mandamus rulings.  Will they continue to guard the district’s importance and err on the side of rejecting transfer motions?  Or will they hedge against further mandamus writs or reversals on appeal by more willingly transferring cases out of the district—and send with them the district’s unique position?  Future analysts might look back to December 2009 and see that Nintendo marked the end of the game for the Eastern District of Texas.

By Rajiv Batra.

The American legal profession is not generally known for adopting new technology, setting up open access to laws and legal procedures, or offering things for free.  Internet culture is the opposite: fervently experimental, open, and free/shared whenever possible.  Private intersections of the two have fallen on a continuum, from closed and expensive like Lexis/Westlaw, to open and free like the new Google Scholar (see our analysis of Google Scholar here).  One of the latest innovations in open access to previously closed legal information is RECAP, a project of Princeton’s Center for Information Technology Policy.  Created by computer scientists with a policy tilt—not J.D.s—RECAP takes aim at PACER, the online service for accessing federal court records.  RECAP threatens to unravel PACER’s paid-access system in the name of “hastening the day when court records would be freely available to the general public via the Internet.”

PACER

PACER, which stands for Public Access to Court Electronic Records, “is an electronic public access service that allows users to obtain case and docket information from Federal Appellate, District and Bankruptcy courts, and the U.S. Party/Case Index via the Internet.”   Started as a pilot program in 1989 (PACER chronology pdf), PACER allows registered parties to access public court documents from most federal courts, and is popular—even essential—for many attorneys litigating in federal court.  It is not a single database – each participating federal court operates its own document database, and PACER provides centralized registration, billing, and technical support.

PACER is funded by fees collected from users.  Users pay eight cents per page for records accessed through PACER—primarily pdfs of court papers, and also search results and document lists.  PACER’s fee structure is mandated by Congress, originally in 1988 and reapproved most recently in the E-Government Act of 2002.  There are exceptions to the eight cent charge; for example, “written opinions” by judges “that set … forth a reasoned explanation for a court’s decision” are available for free, and the maximum charge for any single document is capped at 30 pages ($2.10).  Additionally, courts may exempt users from paying fees “in order to avoid unreasonable burdens and to promote public access to such information.”  However, “exemption of PACER fees will only apply in the jurisdiction that issued the order,” so to receive a fee exemption applying to all documents accessible through PACER would necessitate petitioning each of the federal courts separately.

Though ahead of the internet-curve at the time of its inception, PACER has come under fire for its “cumbersome” interface and its continued use of fees in an age of increasingly free access to all sorts of information online.   Critics argue that in America’s common-law system, court documents and decisions form the substance of the law itself, and that PACER’s fees restrict access to what should be universally available for free.  Moreover, PACER collects more money in fees than are needed to run its servers and maintain the system—$150 million more, as of 2008—which undermines any claim that eliminating PACER’s fees would eliminate PACER itself.  There have been calls for legislative change to open up access to PACER (among other repositories of government data), but little movement toward actual change – especially since federal funding would have to replace the fees used to keep PACER operational.  Without any such changes, the information in PACER remains closed off—not all of its documents make it onto Westlaw or Lexis, and almost none of them will be caught in Google Scholar’s new legal net.  There have been efforts to pay for and share large sweeps of data from PACER, but they have been necessarily incomplete.

RECAP

Enter the technological, crowdsourced solution: RECAP.  A project from Princeton’s Center for Information Technology Policy, RECAP—with the motto “Turning PACER Around” explaining the backwards name—opens up access to the centralized documents by targeting users of the system instead of  exclusively pushing for legislative policy changes.  RECAP is a Firefox browser plugin that activates when a user logs into PACER.  It then has two functions: RECAP automatically detects any documents the user accesses and uploads copies to the Internet Archive, and it alerts the user if any of the documents listed on the current PACER screen are available in the archive.  RECAP also creates clickable links to the free, archived documents that appear on the page along with the PACER links.  Thus RECAP users collectively share the documents they access from PACER and each document need only be paid for once to be free for everyone thereafter.

Wait… are they allowed to do that?

Though RECAP’s copy-and-upload function might ring copyright infringement alarm bells, the system was designed to open access to legal documents without violating any laws.  With regard to copying and sharing documents written by the court, 17 U.S.C. 105 precludes material by the federal government from receiving copyright protection, saying “Copyright protection under this title is not available for any work of the United States Government.”  RECAP doesn’t only facilitate sharing government works, however; it also works on the briefs, motions, and exhibits submitted by litigation parties.  That material does not fall under 17 U.S.C. 105′s exemption, and thus is subject to copyright protection at its creation.  CITP suggests that RECAP should still be protected from liability under the doctrine of fair use, which allows uses of copyrighted works without permission for things like commentary, news reporting, and research.  However, this is far from a settled point of law—even the posting of briefs by traditional legal research companies Lexis and Westlaw has been called into question.

CITP acknowledges this, and says it would like to “establish [the] precedent” that “citizens . . . have the freedom to share public court documents” without copyright liability.  If challenged on copyright grounds, CITP’s fair use defense might not be so robust: though popularly championed among netizen activists, fair use as a doctrine has been weakened over the years, and it provides its strongest defense with regard to private, partial, transformative works.  RECAP provides public, total, and exact copies of the material in question, though its decidedly non-commercial nature would likely weigh in RECAP’s favor.  CITP’s better defense might be a claim of implied license—arguing that the act of submitting a brief or exhibit to a court implies permission for it to be copied into the public record and then further copied and distributed by commercial and non-commercial organizations as a means of disseminating the common law.

In addition to considering copyright law when designing RECAP, CITP also made sure use of RECAP would not violate PACER’s prohibition (PACER policy pdf) on “any attempt to collect data from PACER in a manner which avoids billing.”  To that end, CITP points out that “RECAP users pay for every document they download from PACER, just like any other user . . . RECAP simply gives users a second option: to easily share documents directly with one another.”  The Administrative Office of the U.S. Courts has tacitly endorsed this distinction in its Notice for Fee Exempt PACER Customers, in which it notified fee exempt users that they are not allowed to use RECAP because of additional restrictions on transfers of data by that class of users.  Ordinary, paying users are not subject to the limitation, which the Administrative Office has confirmed in response to direct inquiry.  RECAP may threaten PACER’s long-term fee collection model, but it is not likely to face any significant, unique legal challenges.

Turning PACER around

As part of a trend toward opening access to American common law, RECAP’s place at the heart or the periphery of the movement remains to be seen.   Like any crowdsourcing application, RECAP’s usefulness increases as more people use it.  Yet PACER’s prime users are large, bill-paying law firms, which tend to be wary about adopting new technology and have little incentive to contribute documents they paid for to a free database.

“Success” for RECAP may not be mainstream adoption, however.  Merely by creating the working plugin and calling attention to the problem of restricted access to court documents, CITP has advanced the cause of reforming and opening up access to PACER.  That alone is “Turning PACER around.”

By Rajiv Batra.